Despite the sluggish world economy, the global cosmetics market continues to grow thanks to the high growth of the Asian, Korean in particular, market. Domestic cosmetics production in Korea grew by more than 13% last year due to the continued expansion of exports and rapid growth in the domestic market.

And while we are mostly interested in the end products of the cycle, trends and technology, it’s also fascinating to know how the big scale industry works.

First of all, most of the K-Beauty products you use belong either to Amore Pacific or LG company. Yes, the majority of South Korean beauty comes from these two cosmetics conglomerates. Amore Pacific operates 33 health, beauty, and personal care brands including Sulwhasoo, Laneige, Mamonde, Innisfree, Etude House, Hera, IOPE, Primera, Hanyul, Espoir, Aritaum. LG, which you probably associate with electronics mainly, is, in fact, the brand owner of the History of Whoo, O HUI, SU:M37, Belif, Isa Knox, Beyond, VDL and the Face Shop. These two are in the top list of the largest companies of the world.

Secondly, the majority of actual products are developed and manufactured by two South Korean companies from the Forbes list: Kolmar and Cosmax.

COSMAX

If you look at the names of manufacturers of Cosmetic products that are marketed in Korea, it's easy to find the name "Cosmax." As of 2016, the number of Cosmax cosmetics product units manufactured in Korea and overseas exceeded 600 million. In fact, one out of eleven people all over the world use Cosmax's cosmetics products. The buyers of Cosmax’s products around the world include 600 brands in 100 different countries. Cosmax is a R&D oriented company with a countless number of patents.

Kolmar and Cosmax are the Original Design Manufacturers (ODM), companies which create new product designs and specifications based on the product idea brief provided by the client. In most cases, ODMs also manufacture the product they design, and their clients get the products branded in their own name to sell them in the market.

Let’s say a company has a great idea for natural microneedles that not only increase the effect of skincare products but also self-dissolve without harming the skin. The company has done its research and knows it can market such products. But they don’t really know how to design them or have the manufacturing capability to fabricate them. So, they turn to an ODM which does R&D, designs the actual product and manufactures it, to be eventually marketed by the client. ODMs generally provide outsourced product development services, product manufacturing services, complete product life cycle services, etc based on their own capabilities.

Another type of business Kolmar and Cosmax do is OEM - Original Equipment Manufacturer. OEMs are companies which manufacture products based on the product design and specifications provided by their client. The client does all the market research, R&D and develops its own product. But it does not have the manufacturing capability to fulfil the market demand in time, especially if its market is spread across the globe. So, it turns to an OEM to do the manufacturing on its behalf.

If you are wondering why Korean and Western brands undergo this complex process and outsource R&D and production, think about innovation and speed. No country can compete with South Korea in terms of medical research and innovation. There is also no other market in the world where trends change so rapidly. The Korean cosmetics industry is one where innovative products, which challenge conventional products, compete with each other constantly and receive immediate feedback from its consumers.